Despite the cheerleading efforts of the legacy media, the economic storm clouds are growing on the horizon. Oil – the economic “master resource” – passed $80 per barrel yesterday. Meanwhile, central banks around the world have begun to unwind the stimulus packages used to bail out the economy in the aftermath of the 2008 crash. And all the while, governments are struggling to balance the need to manage their borrowing while maintaining the value of their currencies. Add to that the politics of the new nationalism and you have a recipe for turbulent economic times in the very near future.

By far the biggest blind spot in economics, however, is its treatment of energy as just another cheap resource to be exploited. In fact, energy should be treated as a separate category alongside capital, labour and resources in any model that seeks to explain the way the real world works. This is because energy is the transformative force that allows us to (temporarily) defy the second law of thermodynamics, which says that things move from order to chaos; they break down not up. As Steve Keen puts it:

“Capital without energy is a statue; labour without energy is a corpse.”

Another way of understanding this is to see that for a mere $80 dollars we get more than $350,000 worth of work (if we had to pay a human the average wage to do it). This also explains why relatively small changes in the price of energy (particularly oil because its use is ubiquitous) have such a dramatic impact on the monetary economy. Just three years ago, for every $40 spent on oil, companies were returning $350,000 worth of productive work. Today, the same $40 is returning just $175,000 of productive work; something that largely explains the so-called “productivity puzzle,” as well accounting for why ten of last eleven recessions were preceded by a spike in the price of oil.

Without the net energy to allow for genuine economic growth, sovereign debt becomes as unpayable as consumer and corporate debt. It can be defaulted or it can be inflated away; but it can never be repaid in real terms. States, however, are unlikely to concede this point until it is too late. To put it another way, states will use all of the power at their disposal to maintain the exchange rate of their currencies even if this results in economic ruin for their national economies and their citizens.

These, then are the three vortices which (in the absence of some new high-EROEI energy source) are gradually choking the life out of our global industrial civilisation. As the net energy remaining to us declines, an ever greater proportion of our currency and useable energy will be sucked into them until such time as our economy consists of nothing else but the growing of food and the generation of energy in the service of an ever more capricious state. This process will inevitably involve the acceleration of the decline in living standards that those at the bottom of the income ladder have been experiencing since the 1970s. It will also result in a re-localising of economies as the energy required to maintain global supply chains disappears. In this respect, the conservative nationalism of Brexit and Trump may simply be the relatively benign early manifestation of the politics of our energy-starved future.

A great post from Tim, but aren’t they all? That net energy cliff diagram was the one that did it for me when I first saw it many years ago. I wonder if the wind and solar figures are all that accurate…….how far do the figures go into all the boundary conditions? And the fact that the infrastructure can only be made with fossil fuels and that wind and solar are just not sustainable (at least at present) for that reason. When I point this out to people, I’m criticised for raining on their party and told, “at least people are doing something, not criticising everything as you are”. Aaaargh!

I’ll believe it when I find some place on the planet that uses energy from their solar panels to fertilize, cultivate, harvest, and transport all of their food, and that builds all the components in their solar energy system with energy from their solar energy system.

Women can now throw away their contraceptives,” said Tanzania’s President John Magufuli last Sunday. Secondary education is now free in the East African country, he pointed out, so children are no longer such a major expense. Tanzania needs more people, and women who don’t have more babies are just lazy.

“They do not want to work hard to feed a large family, and that is why they opt for birth control and end up with one or two children only,” Magufuli continued. “I have travelled in Europe and elsewhere and have seen the harmful effects of birth control.”

WTF! The world’s mega fauna is surely doomed. Such statements above make me angry and sad but at least now, thanks to you Rob,I understand why this way of thinking exists. A bit of John Magufuli exists in everyone. Without denial how would a fully self aware individual cope otherwise.

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Favorite Quotes

For explaining why humans are odd
To Varki and Brower we applaud
A great mystery they solved
With denial we evolved
And created the Higgs, overshoot, and God

Denial not only makes us believe in god, it is god, because denial created us, and denial may destroy us.

The human brain, the God it believes in, and the overshoot it enabled and denies, all resulted from the same improbable genetic adaptation that occurred about 100,000 years ago.

Denial is the reality that must be most aggressively denied to avoid collapsing the house of cards that keeps us functioning.

The most amazing thing about human overshoot is that we do not discuss it.

You know you are in trouble when reduced CO2 emissions from an economic collapse caused by low-cost oil depletion is not sufficient to prevent civilization collapse from climate change caused by previously emitted CO2.

Our only choices are do we want to fall from a higher elevation later, or climb down from a lower elevation sooner?

Things that can’t continue usually stop too late.

Truth is like poetry and most people hate poetry.

All 8 billion of us owe our existence to a six-inch layer of topsoil and the fact it rains; 6 billion of us also owe our existence to nitrogen fertilizer created from natural gas by Haber-Bosch factories.

While it digs its own grave, all the mind can do is entertain fantasies and create excuses.

When the only paying job in town is sawing off the branch which you are sitting on, you….saw away! You might refuse to saw and hang yourself from that branch, but the end is the same anyway, and that option is much less fun. (Cynic @Megacancer)

It is remarkable that a brain emerged from a cloud of hydrogen and figured out the laws of physics that governed, and possibly made inevitable, its own creation and destruction.

We have met the oblivious and they are us.

All 8 billion of us originated from one small tribe in Africa about 100,000 years ago that gave birth to a child with an improbable mutation for a more powerful brain that denied reality. The other tribes were soon toast and we took over the planet. We’re all close cousins. I love you all. Except the deniers.

Meaning comes from understanding why we can understand there is no meaning.

Way too many smart people with big reputations are wrong about everything that matters. Something’s gonna happen that gives them an excuse not to have to admit they were in denial.

One of the most, if not the most, precious and rare things in the universe is the human brain. We have a cosmic obligation to use it and to confirm it works.

Fire to cooking to intelligence to denial to god to plotting to capital punishment to self-domestication to Apollo 11 to 7 billion too many.